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FTC Rejects Ad Labeling on TV

The Federal Trade Commission staff yesterday rejected a request from a consumer group to regulate the practice of advertisers' paying to strategically place products on television shows.

Commercial Alert, a group founded by Ralph Nader, wanted the agency to require advertisers to clearly label such "product placements" as advertisements. Companies spent an estimated $3 billion in 2003 to get products displayed in movies and TV shows, according to an ad agency study.

The FTC staff said there is no indication that such product placements mislead or deceive consumers because no claims are made about the products. Usually the product or its logo -- such as the Coca-Cola logos on the judges' drinking cups on "American Idol" -- just appears on screen, wrote Mary K. Engle, the agency's associate director for advertising practices, in a letter to Commercial Alert. "The product's performance is not discussed. Therefore, the rationale for disclosing that an advertiser paid for a product placement . . . is absent."

Engle also said there was no consumer harm from product placements in children's programs, even if they prompted kids to pester their parents to buy a particular product. "In that regard, product placement seems no different from ordinary advertising. That it may result in children asking their parents to buy products seen on television does not constitute an unfair or deceptive practice" that would be illegal, she wrote. Any further FTC action on the issue would be case by case basis, she said.

Gary Ruskin, the executive director of Commercial Alert, said the agency's decision "doesn't make sense. To say there can be no deception without claims is based on a highly antiquated notion that advertising persuades only through claims and not images. That may have been somewhat true 70 years ago, but [it's] certainly wrong today."

Ruskin said his group would lobby Congress to require the word "advertisement" to appear prominently on-screen when any product placement occurred.

The Association of National Advertisers applauded the staff decision. The proposal would have meant that "any time a product was in a show, there would have to have been a pop-up ad saying it was an advertisement," said the group's executive vice president, Daniel L. Jaffe. "That's a totally disruptive and radical proposal."

Commercial Alert also asked the Federal Communications Commission to regulate product placements by requiring TV networks to clearly and conspicuously identify them; that request is pending.

In its petition to the FTC, Commercial Alert also complained about celebrities promoting specific prescription drugs on TV news and talk shows without disclosing that they had financial ties to the companies that make the drugs.

FTC's Engel said the question of whether an advertiser should disclose that a celebrity has been paid will be considered as the commission reviews its endorsement guidelines this year.